Answer each of the following questions using complete sentences.

Part I:Harper is shopping for a home and a mortgage for $175,800 with which to purchase this home. In her search, she was eligible for three different mortgages:

• a 30-year, fixed-rate mortgage at 6.15%
• a 30-year, 6/1 adjustable-rate mortgage at 5.89% with a 2/9 cap
• a 30/6 balloon mortgage at 5.1%

Which mortgage has the least expensive initial monthly payment? How do you know?

Part II:Which mortgage is likely to have the lowest total cost? Why?

Part III:What are the advantages and disadvantages of a fixed-rate mortgage, an adjustable-rate mortgage, and a balloon mortgage?